Bumper year for hotel development in London will dampen performance

Around 9,000 hotel bedrooms are set to open in London this year – more than the 8,000 that launched during the Olympic year of 2012.

The impact of the unprecedented growth in hotel capacity will contribute to what is forecast to be only a modest growth in occupancy and room rates during 2018, alongside other factors including a strengthening of the pound and a weakening in economic growth.

News figures published this week in the PwC Hotels Forecast 2018 highlights that occupancy in London is set to remain at 82%, with virtually flat growth of 0.4% this year and 0.3% next year.

Average daily rate (ADR) growth in the capital is expected to grow by only 0.2% this year, some way off last year’s increase of 4.3%. However, the expected ADR of £149 by the end of 2018 is a record in nominal terms, with more robust growth predicted for next year, up 1.6% to £151.

Revenue per available room (revpar) is forecast to see an increase of only 0.6% to £122, compared to 4.6% last year. In 2019 revpar is predicted to grow by 1.9% to
£124.

Meanwhile in the regions, where occupancy reached a high of 76% last year, marginal growth of 0.6% and 0.5% in 2018 and 2019 respectively is forecast, up to a figure of 77%.

ADR and revpar in the regions is expected to increase by 0.6% and 1.2% in 2018 and 2019 respectively to £72 (2017: up 3.1%), while revpar is forecast to grow by 1.1% this year to £55 and 1.4% in 2019 to £56.

Liz Hall, head of hospitality and leisure research at PwC, said that one of the main challenges to growth for hoteliers will be the increase in competition, “with more rooms potentially set to open in London than the Olympic year, that will mean a lot of rooms to fill”.

Major new hotel openings in the capital include the 334-bedroom Principal London (April), the 129-bedroom Lincoln Plaza London, Curio Collection by Hilton (spring) and the 193-bedroom the Dixon (autumn), which will operate under Marriott’s independent Autograph Collection from Dominvs Group.

Hall added: “The boost to inbound holidays from the weak pound has started to fizzle out and ongoing uncertainty around Brexit and the fragile economy is a recipe for some tough year-on-year comparisons for the next few months.

“Hotels will be looking to events such as the Royal Wedding in May to provide an uplift while other events like the Farnborough International Air Show and additional unique sporting events will do the same for the regions.”